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Lord Skelmersdale: My Lords, cannot the noble Baroness understand that it is quite possible that both will happen and that both are wrong?

Baroness Hollis of Heigham: My Lords, I do not see how that can be entirely consistent. The point about the

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childcare credit seems to me to be very straightforward. We are saying that WFTC supports low earners. If to earn that low pay a person needs the assistance of childcare benefit, we need to help subsidise it, otherwise, the lone parent will stay on income support. Alternatively, if, for example, there is a couple in work, the woman may not otherwise be able to afford to work because she would have to care for her children.

Is the party opposite asking, for example, that a mother caring for her child should receive payment for it through the WFTC? Are we really talking about wages for housework; in other words, wages for child home care? Alternatively, are noble Lords opposite saying that lone parents who cannot afford to work because of their childcare costs should not receive it because they will, somehow, be relatively more privileged than a couple where the mother stays at home and does not work? I give way to the noble Baroness.

Baroness Knight of Collingtree : My Lords, I am grateful to the Minister for giving way. However, she seems to be in some doubt about what is in our minds. Other countries, notably France, recognise the advantage to the country of having the mother staying at home looking after the child and take account of the cost to the mother of doing so. What we are doing in this Bill is failing to take any account of the cost to the mother; we are simply paying her to tell someone else to look after the child.

Baroness Hollis of Heigham: My Lords, it is perfectly proper to ask that there be decent and adequate support for children. That is done in this country through child benefit which is a benefit that can be received and can be taken by someone into work. We are going up to £15 for the first child and £10 for the second child as of next April. That is the appropriate benefit. The WFTC seeks to do something rather different: while supporting families, it will also produce an incentive for work. To pay benefit to a woman staying at home looking after her children is not a work incentive. The WFTC is concerned not only with supporting families; it is also a work incentive. If childcare costs are so high that there can be no work incentive, as may be the position for a lone parent, it is reasonable that those costs should be met in part. That is the philosophy behind it.

We are not in any sense saying that a parent who chooses to stay at home and look after her children is doing an inferior or a second-rate job. That is not the case at all. However, that is done through other methods in the tax and benefit systems and not through the WFTC. I do not think it reasonable to ask the WFTC to carry the whole burden of social security. It is complementary to other areas of social policy and social support, but it is doing a separate job which is to ensure work incentives while supporting families at the same time. Indeed, projects like the Sure Start programme and the increases in child benefit will give the kind of support to children that, like the noble Baroness, I would like to see happen.

A third set of questions associated with employees were those relative to DPTC which were raised by the noble Lord, Lord Rix. We do expect disabled people's

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take-up of this benefit to double compared with the take-up of DWA. I am glad of its welcome. We accept many of the difficulties identified by the noble Lord. He raised, first, the question of whether the 16-hours' rule was a reasonable one for disabled people who might be capable only of very limited work. This is an issue which concerns us. It has been suggested by RADAR and its director, Bert Massie, that we should perhaps consider whether we should be piloting some possibilities in that respect. However, at the end of the day the DPTC, like the WFTC, is about a work-support benefit. It is probably not unreasonable to think that 16 hours is the point at which one is talking about a commitment to work. However, when talking about fewer than 16 hours, a disabled person would be able to keep the first £15 of what he or she earned or, indeed, might be eligible for some £58 on therapeutic earnings. We could perhaps look into the matter, but if one slid below that, I believe that the line of what counts as being in work supported by benefits, as opposed to being on benefit supported by some modest earnings, becomes very blurred.

The noble Lord raised points about the position of a disabled child. In a family claiming DPTC, a disabled child will of course qualify for two children's tax credits--one of the standard type and the second for his or her disability. We are also ensuring that a disabled child will be eligible for childcare up to the age of 16.

The noble Lord, Lord Swinfen, asked about the two years' contributions in terms of incapacity benefit. If someone in work is getting tax credit, he is therefore also acquiring his right to continue to claim IB. Moreover, the linking rules continue to apply. So I do not think that the problem envisaged by the noble Lord should occur. However, if the noble Lord has any further difficulties in that respect, perhaps he could write to me and I would then seek to explain the position further. The double combination of being in work and continuing to build up your credits for IB purposes and contributory credits together with the linking rules should protect against the situation that worries the noble Lord.

The second bundle of issues raised related to burdens on business. I believe that the noble Lords, Lord Higgins and Lord Astor, together with others, complained, first, about the duty of confidentiality and stressed the worries about privacy that employees might face as regards an employer. I hoped that I had addressed that issue. One has only to look at the family credit details, which I just happen to have in front of me. Such information shows that the amount of work involved and the amount of detail that the employer has to have about the employee is already quite considerable. I am not trying to suggest that some of that work will not continue with WFTC. However, a person's tax credit will vary not just because he may be holding a second job but also because of what his partner may be doing. For example, she may be in work; she may be changing jobs; she may leave him; they may have an additional child; or, indeed, they may have additional childcare expenses. All of those considerations can affect the amount being paid through the working families' tax credit. I believe that it would

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be virtually impossible for any employer to be able to read across from the amount being paid to the particular circumstances of the employee. The capacity, so to speak, to de-construct that would be most difficult.

The issue of the additional costs to business was raised. The noble Lord, Lord Goodhart, pressed me about the real cost involved and as to whether it was £37 multiplied by 10. No, the compliance costs are borne not only by employers in the case of WFTC but also by those who do not contribute. As the noble Lord recognised, the £37 is a weighted average across those small employers of different types which have one or more WFTC employees and those which in a particular year may have none, although they may have during the following year. I give way to the noble Lord.

Lord Goodhart: My Lords, I am grateful to the Minister for giving way. Can she explain to us how it is that the compliance costs are borne by those firms which do not in any year pay anyone through WFTC? I simply do not see how that can be possible. It seems to me that it is all set out in paragraph 56 of the draft impact assessment. I believe that we need to take a closer look at what that really means.

Baroness Hollis of Heigham: Yes, my Lords. However, the point is that the employers who do not have a WFTC employee will, none the less, have to educate themselves on WFTC and ensure that their payroll systems are capable of paying tax credit if required. As the noble Lord said, that detail is indeed set out in the regulatory impact assessment--

Lord Goodhart: My Lords, I am sorry to interrupt the Minister again, but does that not refer to the implementation cost and not to the recurrent cost?

Baroness Hollis of Heigham: My Lords, we are talking about two sets of figures. We estimate that the non-recurrent cost/the implementation cost will be about £40 million, and that the recurrent compliance costs will be around £100 million. We expect that to be the annual cost.

Other noble Lords pressed for the exemption of small businesses. I believe that my noble friend Lady Turner dealt with that aspect very effectively. Perhaps we should consider just what that might mean. If we were to allow an opt-out for small employers having, say, up to four, five or 10 employees, that would mean that WFTC would not operate in virtually the whole of the rural countryside because most rural businesses are small ones. It would also mean that there would be an incentive for larger companies to disaggregate.

We have already been told by one major high-street distributor and retailer that if smaller firms with fewer than 10 employees were allowed to opt-out, it would break all its shops down into separate units in order to come below the employee threshold. Therefore, to avoid a proper employer's responsibility, we would then get the thin end of the wedge for disabled people. We have similar arguments about the 20 or the

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15 employees as regards disabled people. It would mean that, each time, small employers would demand special exemption from student loans, the minimum wage, the Disability Discrimination Act or WFTC. Every larger company in the country that could would disaggregate down to slough off responsibilities that are part and parcel of being a good employer. I do not believe that that is a path which we should encourage; indeed, it is not a path that the Government propose to follow.

There are other practical problems about the flow of numbers. For example, does it mean that one extra employee who takes a firm over that ceiling might then bring everyone or just himself into the WFTC code? The problem of fluctuating numbers which we dealt with when we discussed the Disability Discrimination Act remains a real one. It would be quite hard for the Inland Revenue to keep constant tags on the make-up of all full-time and part-time employees within a company in this regard, and whether there was a sufficient density of people, if you like, in regard to a WFTC claim.

We believe it is right and proper that WFTC, like the minimum wage, is a proper responsibility of the employer. However, it is important that we ensure that small businesses can cope with those responsibilities. Therefore there is the small business service, the helpline, and the help with payroll systems that we shall offer. Our approach is to help small businesses overcome any difficulties they may face in implementing the measure rather than to allow them to dodge those responsibilities altogether.

The noble Lord, Lord Skelmersdale, asked about PAYE coding. That is an obvious and deceptively attractive point. However, after discussions with the relevant employers' bodies it was agreed that this would not deliver the necessary accuracy and reliability and that it was better to include it as an itemised entry on a wage slip. There have been questions about employers' cash flow problems. I am mindful of the time. As that involves a technical point with regard to the payment of NICs and PAYE I shall write to the noble Baroness about that, if she will allow me. I shall also write with regard to the problems of the self-employed. Finally, I turn to some implications for government.

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